Sberbank Shares Plunge as US Targets Russia

According to the news report by Bloomberg, Sberbank PJSC, the biggest company in Russia, saw its shares plunge to make it its worst day in more than a decade. The company fought to reassure its investors that the sanctions imposed by the US to punish the Kremlin would have limited impact on their assets.

According to CNN, the US Treasury Department announced more sanctions against 17 Russian officials that have strong ties to President Vladimir Putin. These sanctions also apply to the 12 companies owned by these oligarchs. Some of the companies that these sanctions are aimed at are the government owned Rosoboronexport, a weapons trading company that has ties with Syria, and the Russian Financial Corporation Bank.

Another person named in these sanctions was Oleg Deripaska and the company he controls, United Co. Rusal, an aluminum giant in Russia. Rusal is, in fact, the world’s biggest producer of aluminum outside of China. International trading houses stopped buying from Rusal as a result of these trade sanctions. Banks and their lawyers advised all international trading houses that they could no longer trade with Rusal.

The White House said that these steps were being taken to punish the Kremlin for its destabilizing attempts such as trying to influence western democratic elections in 2016 and 2017.

After these sanctions were announced, stocks of Russian company dropped the most since 2014, when President Putin invaded the Crimean peninsula. Sberbank, however, wasn’t one of the companies on which the sanctions were applied.

According to London-based Investec Bank Plc emerging markets trader Julian Rimmer, Sberbank did not suffer because it was the most vulnerable to sanctions imposed by the US. Rather, the lender got hit because it is the biggest company in the country and most people have invested in it.

The Chief Financial Officer of Sberbank, Alexander Morozov stated that the total risk that the bank faced from these sanctions was 2.5% of their assets. Morozov said that loans were collateralized and this included assets that weren’t covered by the sanctions that were announced on Friday. He also said that the management was very carefully monitoring the situation and taking all possible steps to ensure that negative consequences of these sanctions were minimized for the bank.

Prior to the announcement of these sanctions, Sberbank’s total assets had amounted to 23.4 trillion rubles or about $390 billion by March end.

However, after the sanctions were imposed and announced, the bank saw its share prices plunge 17% in Moscow, which is the biggest drop it has experienced since the financial crisis in 2008. Despite this huge fall, the company is a favorite for investors and its shares are still trading 37% higher than the same time a year ago.

According to the BCS Global Markets’ co-head of equities Luis Saenz, Sberbank was badly – and unjustly – hammered just because it is a “proxy” for Russia. He also stated that if this kind of compliance sell-off continues, then it would be a good time to buy Sberbank shares.

Unfortunately, the MOEX fell 8.3% and the ruble also dropped below 60 to the dollar for the first time since November 2017.

President Vladimir Putin’s spokesman Dmitry Peskov spoke with reporters over a conference call and stated that the Kremlin needed time to assess what the impact of these sanctions was going to be. It would also take time to analyze what retaliatory measures would need to be taken.

However, Russia’s Foreign Ministry issued a strong statement, saying Russia would give the US a harsh response and that what the US was doing was called robbery.

Luis Aureliano is a business writer and financial analyst. With over 15 years of experience in global finance and an MBA in economics and management, Luis’s areas of expertise include business, marketing, communications, personal finance, macro economics, stocks and emerging markets.

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